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Nicknamed Aleck, Woollcott was born near Red Bank, New Jersey, and graduated from Hamilton College in Clinton, New York. In his early twenties he contracted the mumps, which apparently left him mostly, if not completely, impotent. He never married or had children, although he had a large number of female friends, most notable of whom were Dorothy Parker and Neysa McMein, to whom he actually proposed the day after she had just wed her new husband, Jack Baragwanath. (Once Wollcott told McMein that “I’m thinking of writing the story of our life together. The title is already settled.” McMein: “What is it?” Woollcott: “Under Separate Cover.”)

Woollcott was born in an 85-room house, a vast ramshackle building that had once been a commune. It was called The North American Phalanx, and was in Phalanx, New Jersey. There were many social experiments in the mid-19th century, some more successful than others. When The Phalanx fell apart after a fire there in 1854, it was taken over by the Bucklin family, Woollcott's maternal grandparents. There, amid his extended family, Woollcott spent large portions of his childhood. His father was a ne'er-do-well Cockney who drifted through various jobs, sometimes spending long periods away from his wife and children. Poverty was always close at hand.

The Bucklins and Woollcotts were avid readers, giving young Aleck a lifelong love of literature, especially the works of Charles Dickens. Through a family friend, Dr. Alexander Humphreys (after whom he was named), Woollcott made his way through college, graduating from Hamilton College, in upstate New York, in 1909. There, despite a rather poor reputation (his nickname was "Putrid") he founded a drama group, edited the student literary magazine, and was accepted by a fraternity.

He was one of the most prolific drama critics at The New York Times and was an owlish character whose caustic wit either joyously attracted or vehemently repelled the artistic communities of 1920s Manhattan. He was banned for a time from reviewing certain Broadway theater shows. As a result he sued the Shubert theater organization for violation of the New York Civil Rights Act, but lost in the state's highest court in 1916 on the grounds that only discrimination on the basis of race, creed or color was unlawful. From 1929 to 1934 Woollcott wrote a column called "Shouts and Murmurs" for The New Yorker. He was frequently criticized for his ornate, florid style of writing and, in contrast to his contemporaries James Thurber and S. J. Perelman, he is little read today, although his book, While Rome Burns, published by Grosset & Dunlap in 1934, was in 1954 named by critic Vincent Starrett as one of the 52 "Best Loved Books of the Twentieth Century".

Billed as The Early Bookworm, Woollcott was first heard on CBS radio in October 1929, reviewing books in various timeslots until 1933. His CBS show The Town Crier, which began July 21, 1933, opened with the ringing of a bell and the cry, "Hear ye, hear ye!", followed by Woollcott's literary observations punctuated with acidic anecdotes. Sponsored by Cream of Wheat (1934—35) and Grainger Tobacco (1937—38), it continued until January 6, 1938. He had no reservations about using this forum to promote his own books, and the continual mentions of his While Rome Burns (1934) made it a bestseller.

He was one of the most quoted men of his generation. Among Woollcott's classics is his description of the Los Angeles area as "Seven suburbs in search of a city" ... a quip often attributed to his friend Dorothy Parker. Describing The New Yorker editor Harold Ross, he said: "He looks like a dishonest Abe Lincoln." He claimed the Brandy Alexander cocktail was named for him.

Woollcott was renowned for his savage tongue. He dismissed a notable wit and pianist: "There is absolutely nothing wrong with Oscar Levant that a miracle can't fix." He greeted friends: "Hello, Repulsive." He submitted the shortest theatrical review in history: in his review of the Broadway show Wham!, he simply wrote "Ouch." When a waiter asked him to repeat his order, he demanded "muffins filled with pus."

His judgments were frequently eccentric. Dorothy Parker once said: "I remember hearing Woollcott say reading Proust is like lying in someone else's dirty bath water. And then he'd go into ecstasy about something called, Valiant Is the Word for Carrie, and I knew I had enough of the Round Table."

Wolcott Gibbs, who often edited Woollcott's work at The New Yorker, was quoted in James Thurber's The Years with Ross on Woollcott's writing:

"Shouts and Murmurs" was about the strangest copy I ever edited. You could take every other sentence out without changing the sense a particle. The whole department, in fact, often had no more substance than a "Talk [of the Town]" anecdote. I guess he was one of the most dreadful writers who ever existed.

After being kicked out of the apartment he shared with The New Yorker founders Harold Ross and his wife Jane Grant, Woollcott moved first into the Hotel des Artistes on the Upper West Side of Manhattan, then to an apartment at the far end of East 52nd Street. The members of the Algonquin Round Table had a debate as to what to call his new home. Franklin P. Adams suggested that he name it after the Indian word "Ocowoica", meaning "The-Little-Apartment-On-The-East-River-That-It-Is-Difficult-To-Find-A-Taxicab-Near". But Dorothy Parker came up with the definitive name: Wit's End.

Woollcott yearned to be as creative as the people with whom he surrounded himself. Among many other endeavors, he tried his hand at acting and co-wrote two Broadway shows with playwright George S. Kaufman, while appearing in two others. He also starred as Sheridan Whiteside, for whom he was the inspiration, in the traveling production of The Man Who Came to Dinner in 1940. He also appeared in several cameos in films in the late 1930s and 1940s. He was caricatured twice in Warner Brothers Cartoons in 1937: as "Owl Kott" in The Woods Are Full of Cuckoos, and as the town crier in Have You Got Any Castles, playing almost identical roles in each.

Politically, Woollcott called for normalization of U.S.-Soviet relations. He was a friend of reporter Walter Duranty, even though he described him as a "man from Mars." He was also a friend of Soviet foreign minister Maxim Litvinov, and traveled to the USSR in the 1930s, as well as sending his friend Harpo Marx to Moscow on a comedy tour in 1934. Yet he was attacked viciously in the left-wing press after his visit to the Soviet Union for his less than laudatory depiction of the "worker's paradise."

Towards the end of Woollcott's life he semi-retired to Neshobe Island in Lake Bomoseen in Vermont, which he had purchased. Shortly before he died, Woollcott admitted: “I never had anything to say.”

Thurber in The Years With Ross also reports Woollcott describing himself as 'the best writer in America', but with nothing in particular to say; Wolcott Gibbs made a similar criticism of himself; both men had a background of journalism and theatrical criticism, their principal literary efforts being judgements upon the efforts of others. Both were reluctant to test their talent with any boldly original work. Woollcott was primarily a storyteller, a retailer of anecdotes and superior gossip, as many of his personal letters reveal. His letters also reveal a warm and generous heart and a self-effacing manner distinct from his waspish public persona, and his many lasting and close friendships with the theatrical and literary elite of his day.

Woolcott was friends with actress Katharine Cornell and it was he who bestowed the moniker "First Lady of the Theatre" upon her. He often gave her extremely favorable reviews, and also her husband's productions, director Guthrie McClintic.

Woollcott was still not saying anything...at great length...when, on January 23, 1943, he appeared on his last radio broadcast, as a participant in a panel discussion on the CBS Radio program The People's Platform. Marking the tenth anniversary of Adolf Hitler's rise to power, the subject was "Is Germany Incurable", and featured Woollcott and Rex Stout and Marcia Davenport. Ten minutes into the broadcast, Woollcott commented that he was feeling ill, but continued his remarks. "It's a fallacy to think that Hitler was the cause of the world's present woes," he said. Woollcott continued, adding "Germany was the cause of Hitler." He said nothing further. The radio audience was unaware that Woollcott had suffered a heart attack. He died at New York's Roosevelt Hospital a few hours later, aged 56.

He was buried in Clinton, New York, at his alma mater, Hamilton College, but not without some confusion. By mistake, his ashes were sent to Colgate University in Hamilton, New York. When the error was corrected and the ashes were forwarded to Hamilton College, they arrived with 67¢ postage due.

Woollcott was portrayed by the actor Tom McGowan in the 1994 film Mrs. Parker and the Vicious Circle.